Authorities in Guangzhou, Guangdong Province have issued a new regulation for the city's fast growing non-governmental sector, deleting a draft clause stipulating that NGOs that receive overseas funds or are "under de facto management" by overseas organizations should be shut down.

Analysts and NGO professionals said that it is a positive signal from the government that will encourage the development of NGOs.

According to the regulation, which will take effect in 2015, NGOs will only need to submit a report to management authorities 15 days before obtaining overseas funds. The report should include information on the form, scale, participants, time, location, and budget of their activities.

The regulation has been amended following a controversial draft published in late 2013.

The draft stipulated that any local NGOs, if their funds mainly derive from overseas organizations, will be regarded as a branch of an overseas organization in Guangzhou or as under its de facto management.

These NGOs, along with others that share the same logo, name and similar businesses with overseas organizations, should be shut down, read the draft.

From October 22 to 25 this year, Guangzhou-based ngocn.net conducted a survey on the draft document. Some respondents said the definition of illegal NGOs is vague, and could lead to panic in the non-profit sector.

Several Guangzhou NGOs reached by the Global Times revealed that they have received overseas funds.

Wang Jiangsong, a professor of labor relations with the China Institute of Industrial Relations, told the Global Times that compared with the draft, the formal regulation is a progressive move, as the Guangzhou government officially admitted that it is legal for NGOs to accept overseas funds and will promote the development of local NGOs.

A clause deleted from the draft stipulated that "after submitting a report on major activities or changes, the authorities should reply within five working days." This means that NGOs do not necessarily need to get an approval from the authorities for their report, reported caixin.com.

"The Guangzhou government is ready to implement transparent management of NGOs who accept overseas funds. It means NGOs won't have to receive cash in secret," said Wang.

Wang revealed that security authorities had covertly monitored transactions of overseas funds to local NGOs. "The original decision to shut down NGOs that accept overseas funds was due to fears that some NGOs would be manipulated by overseas forces and conduct activities that may endanger national security and undermine social stability," said Wang.

Silent Contest, a documentary allegedly produced by the Chinese People's Liberation Army National Defense University that was circulated online in October last year, said explicitly that some foreign NGOs have been targeting promising young Chinese politicians and intellectuals and trying to subvert them, citing the Ford Foundation, the China International Republican Institute, the Carter Center and the Asia Foundation.

Wang said that the extreme rarity of such evidence and public doubts could have contributed to the deletion of the clause, but the Guangzhou government will still maintain a degree of supervision by requesting NGOs to report overseas funding.

"It's hard for us to get domestic money, so most of our funding comes from overseas. We have not been banned from doing this, but I think the government should focus more on the usage of the funds instead of its source," said Ah Qiang, executive director of Guangzhou-based LGBT support group PFLAG (Parents, Families, Friends of Lesbians and Gays).

Guangzhou-based NGOs previously needed to pass an annual inspection and would be shut down if they failed in two consecutive years.  

The stipulation was canceled in the formal document. NGOs still need to submit an annual report for inspection, but a detailed financial audit report is no longer required.

"While welcoming overseas funds, it is also important to prevent the infiltration of overseas forces. We should open more domestic financing channels for NGOs to achieve that," said Wang.